June 01, 2011

Judge Upholds Ruling in Tobacco RICO Case

A federal judge in Washington today refused to vacate a landmark ruling and injunction in 2006 that said a group of tobacco industry companies conspired to dupe consumers about the health risks of smoking.

Lawyers for companies that include Philip Morris USA, its parent company Altria Group, Inc. and R.J. Reynolds Tobacco Company, urged Judge Gladys Kessler of Washington federal district court to vacate or modify aspects of the injunction the judge issued nearly five years ago.

The attorneys, including Beth Wilkinson for Philip Morris and Altria, argued that Kessler no longer has control over the case because of a new federal law, the Family Smoking Prevention and Tobacco Control Act of 2009. The tobacco companies' lawyers said Kessler’s ruling in 2006 interferes with Food and Drug Administration regulations and has the potential to create conflicting regulatory requirements.

Kessler said today in a 26-page opinion the tobacco companies have offered “no facts which would warrant revisiting the findings of this court—findings that were affirmed by the Court of Appeals.” The judge also said she has “ample expertise” to craft court-ordered remedies that comply with anti-racketeering laws.

FDA regulation, the judge said, targets issues of concern to public health officials. Kessler said her focus is any violation of federal racketeering laws. “FDA rulemaking is not designed to prevent future racketeering activity covered” by the Racketeer Influenced Corrupt Organization Act, the judge said.

The defendants' fear of a clash between the judiciary and Congress, the judge said, is “premature and speculative.” In the event, she said, that the FDA issues regulations that conflict with a court order, the government can ask the court to amend the injunction.

Kessler noted the defendant companies are challenging in a separate suit and in administrative proceedings many of the provisions of the Tobacco Control Act. A case is pending in the U.S. Court of Appeals for the 6th Circuit.

“It is difficult to understand how defendants can argue that the Tobacco Control Act will produce their future compliance with RICO when they do not believe that a great portion of the Act should apply to them at all,” Kessler said.

Lawyers for the tobacco companies in March filed court papers (PDF) urging Kessler to vacate her final judgment following the Tobacco Control Act, which addressed the design, manufacturing, marketing and distribution of tobacco.

“This newly established federal regulatory framework extinguishes the court’s jurisdiction over this case in whole or, at least, in significant part,” Wilkinson said in court papers that defendant companies each signed onto. (Gibson, Dunn & Crutcher and Winston & Strawn also represent Philip Morris and Altria. Jones Day represents R.J. Reynolds.)

The new regulation, the tobacco lawyers said, “eliminates any reasonable likelihood that defendants will engage in future joint racketeering activity of the type this court found and on which it premised its forward-looking injunctive relief.”

“The FDA possesses unique regulatory expertise in matters of public health,” the attorneys said. “If the court were to exercise overlapping regulatory authority with respect to tobacco products, there would be an unacceptable risk of inconsistent regulatory determinations that would impair the FDA’s role as the ‘primary federal regulatory authority’ in this area."